[ Manila Bulletin Online ] July 20, 2008
By MELODY M. AGUIBA
The Integrated Agro-Industrial Zone (IAIZ) of San Miguel Corp. (SMC) is bringing tremendous dollar savings and is raising competitiveness of the poultry sector from corn and cassava planting on an expansive 30,000 hectares.
The IAIZ is a backward integration program aimed primarily to provide SMC’s feed and poultry business — B-Meg and Monterey — with a stable supply of raw materials at an economical cost.
Established in 2004, it involves planting of feed raw materials cassava, corn, soya, sweet potato, and sorghum.
"Its thrust is to develop sustainable supply of strategic agri-based raw materials at low delivered cost," said San Miguel Foods Inc.’s (SMFI) Arthur Juan at the League of Corporate Foundation’s Corporate Social Responsibility conference.
A major component of IAIZ is the cassava assembler program. This guarantees farmers a market for their production, prompting farmers to plant the crops. A purchase agreement is signed between SMFI and the farmers under which they mutually agree on the product quality, volume, and delivery schedule for the farm production.
Aside from feed manufacturer B-Meg, SMC companies using the crops are Magnolia and the SMC alcoholic beverage business.
There are now 150 assemblers (that consolidate production and do logistics work) for the program consisting of business and sole proprietors, 69 percent of the assemblers; cooperatives, 21 percent; non-government associations, seven percent; and local government units, three percent.
The biggest area is in Polomolok, South Cotabato, 300 hectares, with Larry Kris Enterprises as the assembler. Three other highly successful zones are in Koronadal City, South, 150 hectares, with Balong Marketing as assembler; in Sta. Cruz, Mindoro where women plant cassava; and in Manolo Fortich, Bukidnon where farmers plant and also produce chipped cassava tubers as source of additional income.
SMFI has a feed mill in Mariveles, Bataan where cassava is made a raw material for feeds. The feeds are in turn supplied by feeds distributors to SMC’s Sumilao, Bukidnon Hog Farm or to SMC’s broiler farm in Orion, Bataan.
Victor Pugan of SMFI said the company is trying to raise production of raw materials locally in order to bring down cost of production.
"This project will improve our cost-competitiveness, or else one day we will be flooded with cheap poultry products from Thailand," he said in an interview.
Farmers are given a guaranteed floor price "that is a fixed amount" or the prevailing market price, whichever is higher. With that agreement, SMFI avoids pole-vaulting (farmers selling their products to the market rather than to the company due to market’s higher price) which occurs in other contract growing agreements that do not have this provision.
SMC also gives farmers start-up technical assistance in production, postharvest, and logistics operations. Another benefit of farmers is a linkage to credit facilities and banking institutions.
With the win-win agreement for both the company and farmers, SMC’s IAIZ is growing to be a 30,000hectare area (projected as of the end of the year) that will produce 100,000 metric tons (MT) of feed and food material.
